Financial adviser shake-up could leave 5m in the dark over how to manage their money

Conservative grandee Lord Flight has called on the City regulator to delay controversial new rules governing how independent financial advisers are paid.

Failure to implement a moratorium, said Flight, would cause ‘major job losses’ in the industry, leaving up to five million people without access to independent advice.

Flight, former shadow Economic Secretary whose career came to a shuddering halt in 2005 when he was recorded arguing for savage public spending cuts, said implementation of the Retail Distribution Review (RDR) rules, to be introduced by the Financial Services Authority, was a ‘pending shambles’ and ‘elitist’.

Rethink: Lord Flight has called on the City regulator to delay controversial new rules governing how independent financial advisers are paid

He also accused the regulator of
hypocrisy by forcing longstanding financial advisers to take
professional examinations to continue in business while not insisting
that its own staff ‘qualify to be regulators’.

From
January, nearly 35,000 IFAs must change the way they are paid. Instead
of taking commission from the companies whose products they recommend,
they will be required to charge their clients fees.

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They
will also only be able to continue if they have passed set
qualifications. The FSA says the moves are designed to increase consumer
confidence in IFAs and put the industry on a more professional
standing.

But Flight,
dubbed Mr City when he was an MP, said many consumers would be unable to
pay the fees demanded – on average £150 an hour – while many advisers
would not pass the required exams in time.

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He
said 22,000 advisers were not yet RDR-compliant with the result that
‘there are the makings of a major consumer disaster with over five
million clients being detached from their advisers’. He added: ‘The RDR
is an elitist concept. The wealthy will not have a problem, but between
2.5 million and five million people will find themselves without access
to financial advice.

‘Much
of the historic financial advice industry will be destroyed with major
job losses. If the January 1 deadline is not delayed, there will be a
period of chaos that will benefit no one, especially the consumer in
whose name this policy has been created.’

Flight
is also angry that while RDR is being imposed in Britain, other EU
countries such as Germany are letting advisers opt out of a fees-only
regime. He said: ‘Why is the UK not managing its timetable and
requirements in line with the EU?’

The
FSA said it would not budge from its January 1 start date, saying: ‘The
RDR has been six years in the making. We have not rushed it.’